Export surge takes some of sting out of rising costs for Walkers

by PETER RANSCOMBE - 06/10/2010

"RISING raw material costs are continuing to take a bite out of profits at Walkers Shortbread but rising exports are helping the iconic food firm to bounce back from the global economic downturn."

Turnover at the family-run company fell by 7 per cent in 2009 to £100.3 million, while pre-tax profits dropped 19 per cent to £9.8m, according to accounts filed at Companies House.

The Aberlour-based firm blamed volatile diary prices for the drop in profits along with the strong pound, which forced up the cost of fruit and sugar.

Joint managing director Jim Walker told The Scotsman that record butter prices and rising wheat costs - caused by a lack of exports from Russia - would again eat into profit margins both this year and next.

Walker said he expected revenues this year to beat last year's total but not to match the 2008 figure because consumer spending remained depressed.

But he hailed a rise in demand from overseas markets this year, following a dip in exports during 2009. Last year's downturn was caused by a glut of stock after weak sales in Christmas 2008 and recessions in some of the firm's key markets.

Walker said the company's shortbread products continued to be popular in ex-pat markets - such as Australia, Canada and the United States - but he also acknowledged the growing influence of emerging markets.

"Markets in the Far East - such as Japan and China - are becoming more important. China is potentially a vast market," he noted.

The company won a record fourth Queen's Award for Enterprise earlier this year, which Walker said was down to the hard work of staff at the firm.

The group - which also makes biscuits, cakes and oatcakes - said it was continuing to develop products for its branded ranges and own-label products for clients such as supermarket chains Sainsbury's and Waitrose.

Walker said the investment in a research and development kitchen at Aberlour - allowing the company to make samples without shutting down the whole production line - was beginning to pay dividends.

The company also makes biscuits for Duchy Originals - the brand set up by Prince Charles to use ingredients grown on his Highgrove estate - and products for diet management company Weight Watchers.

At the end of last year, the Scots firm bought Top Food, a German company that had been acting as its distributor, for £1.5m after its owner retired and Walkers decided it would be beneficial to bring German distribution in house.

The company's accounts also showed that an interim dividend of £3.7m was paid last year, up from £2.1m in 2008.

More Details: http://business.scotsman.com/fooddrinkagriculture/Export-surge-takes-some-of.6567004.jp